“[The OpenSky case] suggests that the PTAB is willing to address misconduct…[b]ut the lack of decisive and swift monetary sanctions in the first place leaves many wondering where the line is that must be crossed.”
Another year down, and another year of interesting developments as the Patent Trial and Appeal Board (PTAB) continued its reign as the most significant patent court in the country. Last year ended with a growing sense that change was on the horizon with President Biden’s nomination of Director Kathi Vidal. And that change did arrive as Director Vidal was confirmed in April and quickly worked to reform PTAB policies. Let’s take a look at the five most significant developments involving the PTAB this year.
1. Director Vidal’s Confirmation and Swift Focus on Fintiv Denials.
On April 5, 2022, the Senate confirmed Director Vidal, filling the void left by Director Andrei Iancu’s departure and ending a debate over whether Acting Director Drew Hirschfeld had the power to administer the director review. Director Vidal quickly got to work issuing guidance on various topics, including the oft-debated use of discretionary denial based on parallel proceedings. The Director’s June 21, 2022, Memorandum, titled “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings With Parallel District Court Litigation” was largely viewed as an attempt to significantly rein in the ability of parallel proceedings—particularly in Western Texas and at the International Trade Commission (ITC)—to serve as a basis to deny inter partes review (IPR) petitions. That intent appears to have been effective, as Fintiv-based denials have since fallen.
Director Vidal’s Memorandum included four key provisions:
- a) ITC proceedings will not be the basis for a Fintiv The ITC-focused provision was particularly influential because ITC proceedings almost always favored the patent owner when it came to the Fintiv factors.
- b) A Sotera stipulation all but guarantees Fintiv In a Sotera stipulation, a petition stipulates that if IPR is instituted it will not raise arguments in district court that were raised or reasonably could have been raised at the PTAB (i.e., it agrees to the plain language of §315(e)(2)). Such a stipulation should hardly burden a petitioner and is one step toward Fintiv denials officially becoming a thing of the past.
- c) The PTAB will not invoke its discretion to deny petitions presenting “compelling evidence” unpatentability. While this practice sounds good in theory, it may create further uncertainty. The Director’s Memorandum states that “[c]ompelling, meritorious challenges are those in which the evidence, if unrebutted in trial, would plainly lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence.” It is unclear how, if at all, this will differ in practice from priori It would have seemed unwise for the PTAB to institute a petition that did not present evidence which, if unrebutted, would have led to a finding of unpatentability. The standard also invites further suggestions of confirmation bias where the same PTAB panel that issues a final written decision has already determined that challenge to be “compelling” and “meritorious.”
- d) Time to trial is no longer based on a scheduling order setting a trial date. The Director’s Memorandum instructed PTAB judges to consider “the median time from filing to disposition of the civil trial for the district in which parallel litigation resides.”
2. The PTAB Reform Act of 2022
June 2022 was a busy month for PTAB developments. In addition to the Director’s Memorandum addressing Fintiv, June saw the introduction of the PTAB Reform Act of 2022. Let’s take a look at some key provisions:
- a) The nail in Fintiv’s The Act would foreclose consideration of parallel proceedings (i.e., in district court and ITC) in deciding whether to institute. Given the Director’s Memorandum, the near-term impact (assuming this provision is implemented while Director Vidal remains in her seat) might not be so significant. But the Act would prevent the pendulum from swinging back toward the patent owner when a future Director is confirmed.
- b) Rehearing must conclude within 120 days of a final written decision. This provision would bring some welcomed certainty as to how long a party can expect a rehearing request to pend post-Final Written Decision (FWD).
- c) Phillips claim construction by statute. The Act would make Director Iancu’s recalibration of the PTAB’s claim construction from the broadest reasonable interpretation to the district court Phillips standard statutory. This also would prevent future pendulum swings.
- d) More parties will have standing to appeal. As it stands right now, not every petitioner that would like to appeal an adverse FWD has standing to do so. The Act would extend standing to “any dissatisfied party that reasonably expects that another person will assert estoppel against the party under §315(e) as a result of the decision.” It remains to be seen whether this provision will hold up under Article III’s injury in fact requirement.
The OpenSky Saga
Anyone paying attention to the PTAB this year has likely heard of the curious case of OpenSky. Let’s recap:
- VLSI won a $2 billion verdict in Western Texas against Intel.
- Following the verdict, OpenSky was formed to file an IPR challenge to VLSI’s verdict. OpenSky’s petition pieced together parts of Intel petitions that had been denied and relied exclusively on expert declarations filed by Intel in the earlier IPRs. The PTAB instituted review.
- After institution, OpenSky emailed VLSI and revealed that the petition was a stick-up game to extract a verdict protection payment from VLSI.
- Eventually, the Director—through the post-Arthrex Director review process—stepped in to review the OpenSky institution decision. The Director found that OpenSky had abused the IPR process, precluded it from further active participation in the IPR, and issued an order to show cause as to why OpenSky should not be monetarily sanctioned.
- The Director also ordered the panel to reconsider the institution decision under the “compelling merits” standard, which standard the panel found to be met. So, the IPR was able to proceed without OpenSky, but with Intel—an otherwise time barred entity—steering the ship.
- VLSI has moved to terminate the proceeding based on res judicata grounds, arguing effectively that Intel had its chance to demonstrate invalidity in district court and failed to do so. That motion remains pending.
- On December 22, Director Vidal issued another decision, this time formally dismissing OpenSky from the proceeding, affirming the panel’s “compelling merits” determination, and ordering VLSI to explain why it should not pay Intel’s attorneys fees for what the Director found to be misleading arguments concerning secondary indicia.
So, where does this all leave us? It leaves VLSI in a position of having to defend a petition that was filed as part of a fraudulent scheme. It also suggests that the PTAB is willing to address misconduct—at least clear and egregious misconduct. But the lack of decisive and swift monetary sanctions in the first place (although they remain a possibility on the horizon) leaves many wondering where the line is that must be crossed. Director Vidal’s show cause order directed to VLSI further suggests that the PTAB is looking to clamp down on all types of potential misconduct, although some may wonder if another case that didn’t involve a fraudulent petition filing may have been a more impactful vehicle. And at the end of the day, if VLSI’s patent is found unpatentable, what does this all say about future schemes, albeit ones that are crafted to be less obvious? The saga almost certainly will continue in 2023 as VLSI faces the uphill battle of a “compelling merits” determination that has been affirmed by Director Vidal.
4. Director Review Close to Being Clarified
Much of 2022 involved anticipation for a groundbreaking Arthrex decision that never came. Rather than fundamentally changing things at the PTAB, Arthrex implemented a system of Director review that will undoubtedly be requested exponentially more than it is granted. In September, the U.S. Patent and Trademark Office provided updated interim guidance on the procedure for Director review pending formal rulemaking. No big surprises here. Most recently, Director Vidal has suggested that Director review will lead to the replacement of the Precedential Opinion Panel with something more akin to an “error correction” panel. Keep an eye on this in the year ahead.
5. Notable Federal Circuit Decisions
This year brought some notable decisions from the PTAB’s reviewing court that will impact PTAB practice in the years ahead.
a) The year kicked off to an interesting start with the Federal Circuit’s decision in California Institute of Technology v. Broadcom Ltd., 25 F.4th 976 (Fed. Cir. 2022). There, the court overruled Shaw Industries and “clarif[ied] that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all grounds not stated in the petition but which reasonably could have been asserted against the claims included in the petition.” Id., at 991. This ruling restores IPR estoppel to what appeared to be the original intent of the America Invents Act—a welcome development for patent owners.
b) Another case that caught the attention of many patent practitioners was the court’s decision in Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc., 25 F.4th 998 (Fed. Cir. 2022). There, the court confirmed that parties can contract away the ability to file IPR petitions through a forum selection clause, similar to practices requiring arbitration over district court litigation.
c) The court also took the opportunity this year to clarify what had been something of a debate concerning disclaimer that could arise from IPR. Particularly, in Trend Micro Inc. v. Cupp Computing AS, 53 F.4th 1376 (Fed. Cir. 2022), the court clarified that a disclaimer does not apply in the proceeding in which it was made. Disclaimer applies only prospectively in later proceedings; intra-proceeding-self-help disclaimer is not an option.
As we turn the corner into 2023, we can expect continuing attention to PTAB reforms, either by congress and/or Director Vidal.
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Mike CiceroDecember 29, 2022 11:31 am
Clearly-written and informative article. Thank you for publishing this.